QUESTIONS/COMMENTS

AAA HOME BUILDER, LLC

BLUE RIDGE

1. Of the 22 (the site plan submitted by AAA shows only 20 lots) single
family homes proposed for Blue Ridge, it appears that none of the
homes will be affordable to low income (less than or equal to 50%
AMFI) or moderate income (less than or equal to 80% AMFI) buyers.
AAA Home Builder shows only 80% AMFI and 140% AMFI in their
proposal and expresses a desire to focus on 140% AMFI buyers.
2. AAA Home Builder was notified, on March 16, 2016 (tens days after the
NOFA application deadline), by the City that AAAs $50,000 bid for the
property at 3844 Blue Ridge was the highest bid received.
3. On March 30, 2016, AAA Home Builder submitted its application to the
City for $971,130 in support, twenty four days after the NOFA
application deadline. The Citys NOFA states, Applications submitted
late will not be accepted.
4. AAA Home Builder shows the Land (Acquisition) Cost in its project
budget as $300,000, but the Citys March 16, 2016 letter indicates AAA
is only paying $50,000 for the land.
5. The proposed timeline for development is not feasible. AAA Home
Builder states, we can complete the houses in a quicker fashion on
the Blue Ridge portion of the site. Firstly, construction of any homes
cannot start until the subdivision plat is approved by the City. Platting
creates the legal description for each of the lots, and it is not merely a
paperwork process. Before an application for plat approval can be
accepted by the City, all (or a very substantial portion) of the land
development must be completed. The City cannot approve a
subdivision plat until the roads, curb and gutter, sidewalks, sanitary
sewer, storm sewer, water, electric, telephone, cable tv, etc. are
physically constructed, inspected, and approved (by the City). Until this
platting process is completed, no lender will close on a construction
loan for any of the houses. Therefore, with about 2-3 weeks for final
engineering, 2-3 weeks for the City to issue Land Disturbance Permits
and Land Development Permits, followed by 2-3 months of land

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development construction, etc. a more realistic start date for house

construction would be more like mid-November or early December (the
City will not issue building permits for each of the houses until the new
lots have been platted), well outside of the Citys 120 day criteria.
The project is significantly undercapitalized. The total project costs are
stated as $4,751,434. However, only $3,797,100 ($1,025,970 in
Builder Equity Financing, $971,130 in COD Grant, and $1,800,000 in
Construction Loan) of financing is demonstrated, leaving a shortfall of
$954,334.
The Land Development costs of $1,037,100 (excluding land cost) are
extraordinarily high at about $47,141 per lot, or about $748 per front
foot (assuming 63 x 160 lots). Unless there are some unusual
conditions at the site, these land development costs could easily be
three times what will actually be encountered. An amount of $15,000
per lot ($330,000 total for 22 lots), or $250 per front foot would be
more typical.
The House Construction is undercapitalized. House Construction costs
are stated as $3,414,334 (or $155,197 per house) which seems
reasonable. However, the Construction financing is limited to 12
houses at a time with a total loan amount of $1,800,000. This capital
restraint will significantly hamper AAAs desire to quickly build these
22 houses. Even if the Construction loan is structured as a revolver,
which is not unusual, the limitation of 12 houses will severely restrict
AAA from building the project in a two-phase process. Regardless of
absorption, the project will drag on for many months merely because
the Construction Loan will limit AAA to a maximum of 12 houses under
construction/inventory for sale at any given time.
The detailed House Construction Budget shows a Land Cost of
$30,000 for each house to be constructed, but this amount is less than
half of the $60,777 AAA says the lots will cost. Given that AAA is both
the developer and the builder, there is no reason for AAA to sell itself
each lot for $30,000 (a total of $660,000 for the 22 lots), although it
represents a fantastic return on its $300,000 investment.